Exhibit 10.03
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of June, 1998, among XXXX
XXXXXX SPECTRUM SELECT L.P., a Delaware limited partnership (the "Partnership,"
formerly Xxxx Xxxxxx Select Futures Fund L.P.), DEMETER MANAGEMENT CORPORATION,
a Delaware corporation (the "General Partner"), and SUNRISE CAPITAL MANAGEMENT,
INC., a California corporation (the "Trading Advisor").
W I T N E S S E T H:
WHEREAS, the Partnership has been organized pursuant to the Limited
Partnership Agreement, dated as of March 21, 1991, as amended from time to time,
and as further amended and restated as of May 31, 1998 (the "Limited Partnership
Agreement"), to engage primarily in speculative trading of commodities
(including, but not limited to, foreign currencies, mortgage-backed securities,
money market instruments, financial instruments, and any other securities or
items which are now, or may hereafter be, the subject of futures contract
trading), domestic and foreign futures contracts, forward contracts, foreign
exchange commitments, options on physical commodities and on futures contracts,
spot (cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as "futures interests") and securities
(such as United States Treasury securities) approved by the Commodity Futures
Trading Commission (the "CFTC") for investment of customer funds;
WHEREAS, the Partnership and the Trading Advisor have entered into
that certain Management Agreement dated May 17, 1991, as amended by Amendment
No. 1 to such agreement, dated July 22, 1992, as amended by Amendment No. 2 to
such agreement dated as of August 31, 1993, and as further amended by Amendment
No. 3 to such agreement, dated November 29, 1996 (together, the "Original
Management Agreement");
WHEREAS, the Partnership and the Trading Advisor wish to amend and
restate the Original Management Agreement upon the terms and conditions set
forth herein;
WHEREAS, the Partnership intends to become a member partnership of
the Xxxx Xxxxxx Spectrum Series (the "Fund Group") by entering into an agreement
pursuant to which units of limited partnership interest ("Units") of such member
partnerships will be sold to investors in a common offering under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement on Form S-1, as it may be amended from time to time (the "Registration
Statement"), and a final Prospectus, dated May 11, 1998, constituting a part
thereof as it may be amended and supplemented from time to time (the
"Prospectus"), and thereafter, pursuant to which such Units can be exchanged by
a limited partner of a member partnership of the Fund Group at the end of any
month after he has been a limited partner of a member partnership of the Fund
Group for six months for Units of other member partnerships of the Fund Group at
100% of the respective Net Asset Value thereof;
WHEREAS, the Trading Advisor has extensive experience trading in
futures interests and is willing to continue to provide certain services and
undertake certain obligations as set forth herein;
WHEREAS, the Partnership desires the Trading Advisor to continue to
act as a trading advisor for the Partnership and to make investment decisions
with respect to futures interests for its allocated share of the Partnership's
Net Assets and the Trading Advisor desires so to act; and
WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Amended and Restated Management Agreement which,
among other things, sets forth certain terms and conditions upon which the
Trading Advisor will conduct a portion of the Partnership's futures interests
trading;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Undertakings in Connection with the Continuing
Offering of Units.
(a) The Trading Advisor agrees with respect to the continuing
offering of Units: (i) to make all disclosures regarding itself, its principals
and affiliates, its trading performance, its trading programs, systems, methods,
and strategies (subject to the need, in the reasonable discretion of the Trading
Advisor, to preserve the secrecy of proprietary information concerning such
programs, systems, methods, and strategies), any client accounts over which it
has discretionary trading authority (other than the names of any such clients),
and otherwise, as the Partnership may reasonably require (x) to be made in the
Partnership's Prospectus required by Section 4.21 of the regulations of the
CFTC, including any amendments or supplements thereto, or (y) to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board; and (ii)
otherwise to cooperate with the Partnership and the General Partner by providing
information regarding the Trading Advisor in connection with the preparation and
filing of the Registration Statement and Prospectus, including any amendments or
supplements thereto, with the SEC, CFTC, NFA, NASD, and with appropriate
governmental authorities as part of making application for registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Partnership may deem appropriate. As used herein, the term "principal" shall
have the meaning as defined in Section 4.10(e) of the CFTC's Regulations and the
term "affiliate" shall mean an individual or entity that directly or indirectly
controls, is controlled by, or is under common control with, the Trading
Advisor.
(b) If, while Units continue to be offered and sold, the Trading
Advisor becomes aware of any materially untrue or misleading statement or
omission regarding itself or any of its principals or affiliates in the
Registration Statement or Prospectus, or of the occurrence of any event or
change in circumstances which would result in there being any materially untrue
or misleading statement or omission in the Registration Statement or Prospectus
regarding itself or any of its principals or affiliates, the Trading Advisor
shall promptly notify the General Partner and shall cooperate with it in the
preparation of any necessary amendments or supplements to the Registration
Statement or Prospectus. Neither the Trading Advisor nor any of its principals,
or affiliates, or any stockholders, officers, directors, or employees shall
distribute the Prospectus or selling literature or shall engage in any selling
activities whatsoever in connection with the continuing offering of Units except
as may be specifically requested by the General Partner; provided that, the
Trading Advisor shall not be required to engage in any activity that may, in its
reasonable judgment, require the Trading Advisor to register as a broker or
dealer with the NASD or any State or that it reasonably believes would be
disruptive to its trading activities.
2. Duties of the Trading Advisor.
(a) The Trading Advisor hereby agrees to act as a Trading Advisor
for the Partnership and, as such, shall have sole authority and responsibility
for directing the investment and reinvestment of its allocable share of the Net
Assets of the Partnership on the terms and conditions and in accordance with the
prohibitions and trading policies set forth in this Agreement or provided in
writing to the Trading Advisor; provided, however, that the General Partner may
override the instructions of the Trading Advisor to the extent necessary (i) to
comply with the trading policies of the Partnership described in writing to the
Trading Advisor and with applicable speculative position limits, (ii) to fund
any distributions, redemptions, or reapportionments among other trading advisors
to the Partnership, (iii) to pay the Partnership's expenses, (iv) to the extent
the General Partner believes doing so is necessary for the protection of the
Partnership, (v) to terminate the futures interests trading of the Partnership,
or (vi) to comply with any applicable law or regulation. The General Partner
agrees not to override any such instructions for the reasons specified in
clauses (ii) or (iii) of the preceding sentence unless the Trading Advisor fails
to comply with a request of the General Partner to make the necessary amount of
funds available to the Partnership within five days of such request. The Trading
Advisor shall not be liable for the consequences of any decision by the General
Partner to override instructions of the Trading Advisor, except to the extent
that the Trading Advisor is in breach of this Agreement. In performing services
to the Partnership the Trading Advisor may not materially alter the trading
program(s) used by the Trading Advisor in investing and reinvesting its
allocable share of the Partnership's Net Assets in futures interests as
described in the Prospectus without the prior written consent of the General
Partner, it being understood that changes in the futures interests traded shall
not be deemed an alteration in the Trading Advisor's trading program(s).
(b) The Trading Advisor shall:
(i) Exercise good faith and due care in trading futures
interests for the account of the Partnership in accordance with the prohibitions
and trading policies of the Partnership provided in writing to the Trading
Advisor and the trading programs, systems, methods, and strategies of the
Trading Advisor described in the Prospectus, with such changes and additions to
such trading programs, systems, methods or strategies as the Trading Advisor,
from time to time, incorporates into its trading programs for accounts the size
of the Partnership.
(ii) Subject to reasonable assurances of confidentiality by the
General Partner and the Partnership, provide the General Partner, within 30 days
of a request therefor by the General Partner, with information comparing the
performance of the Partnership's account and the performance of all other client
accounts directed by the Trading Advisor using the trading programs used by the
Trading Advisor for the Partnership over a specified period of time. In
providing such information, the Trading Advisor may take such steps as are
necessary to assure the confidentiality of the Trading Advisor's clients'
identities. The Trading Advisor shall, upon the General Partner's request,
consult with the General Partner concerning any discrepancies between the
performance of such other accounts using the same trading programs used by the
Trading Advisor for the Partnership and the Partnership's account. The Trading
Advisor shall promptly inform the General Partner of any such material
discrepancies of which the Trading Advisor is aware, other than discrepancies
resulting from different fees or client trading restrictions or relating to the
opening or closing of accounts. The General Partner acknowledges that different
trading programs, strategies or implementation methods may be utilized for
different accounts, accounts with different trading policies, accounts
experiencing differing inflows or outflows of equity, accounts that commence
trading at different times, accounts which have different portfolios or
different fiscal years and that such differences may cause divergent trading
results.
(iii) Upon request of the General Partner and subject to
reasonable assurances of confidentiality by the General Partner and the
Partnership, provide the General Partner with all material information
concerning the Trading Advisor other than proprietary information (including,
without limitation, information relating to changes in control, personnel,
trading approach, or financial condition). The General Partner acknowledges that
all trading instructions made by the Trading Advisor will be held in confidence
by the General Partner, except to the extent necessary to conduct the business
of the Partnership or as required by law.
(iv) Inform the General Partner when the Trading Advisor's
open positions maintained by the Trading Advisor exceed the Trading Advisor's
applicable speculative position limits.
(c) All purchases and sales of futures interests pursuant to this
Agreement shall be for the account, and at the risk, of the Partnership and not
for the account, or at the risk, of the Trading Advisor or any of its affiliates
or its or their stockholders, directors, officers, or employees, or any other
person, if any, who controls the Trading Advisor within the meaning of the
Securities Act. All brokerage fees, commissions and related expenses arising
from trading by the Trading Advisor on behalf of the Partnership shall be for
the account of the Partnership. The Trading Advisor makes no representations as
to whether its trading will produce profits or avoid losses.
(d) Notwithstanding anything in this Agreement to the contrary, the
Trading Advisor shall assume financial responsibility for any negligent errors
committed or caused by it in transmitting orders for the purchase or sale of
futures interests for the Partnership's account, including payment to DWR of the
floor brokerage commissions, exchange and NFA fees, and other transaction
charges and give-up charges incurred by DWR on such trades but only for the
amount of DWR's out-of-pocket costs in respect thereof. However, the Trading
Advisor shall not be responsible for errors committed or caused by DWR or by
floor brokers or other FCM's. The Trading Advisor shall have an affirmative
obligation promptly to notify the General Partner of its negligent errors.
(e) Prior to the commencement of trading by the Partnership, the
General Partner on behalf of the Partnership shall deliver to the Trading
Advisor a trading authorization appointing the Trading Advisor the Partnership's
attorney-in-fact for such purpose.
3. Designation of Additional Trading Advisors and Reallocation of
Net Assets.
(a) If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional
trading advisor or advisors for the Partnership and may apportion to such
additional trading advisor(s) the management of such amounts of Net Assets (as
defined in Section 6(c) hereof) as the General Partner shall determine in its
absolute discretion. The designation of an additional trading advisor or
advisors and the apportionment of Net Assets to any such trading advisor(s)
pursuant to this Section 3 shall neither terminate this Agreement nor modify in
any regard the respective rights and obligations of the Partnership, the General
Partner and the Trading Advisor hereunder. In the event that an additional
trading advisor or advisors is so designated, the Trading Advisor shall
thereafter receive management and incentive fees based, respectively, on that
portion of the Net Assets managed by the Trading Advisor and the Trading Profits
attributable to the trading by the Trading Advisor.
(b) The General Partner may at any time and from time to time upon
two business days' prior notice reallocate Net Assets allocated to the Trading
Advisor to any other trading advisor or advisors of the Partnership or allocate
additional Net Assets upon two business days' prior notice to the Trading
Advisor from such other trading advisor or advisors; provided that any such
addition to or withdrawal from Net Assets allocated to the Trading Advisor of
the Net Assets will only take place on the last day of a month unless the
General Partner determines that the best interests of the Partnership require
otherwise.
4. Trading Advisor Independent.
For all purposes of this Agreement, the Trading Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership.
Nothing contained herein shall be deemed to require the Partnership to take any
action contrary to the Limited Partnership Agreement, the Certificate of Limited
Partnership of the Partnership as from time to time in effect (the "Certificate
of Limited Partnership"), or any applicable law or rule or regulation of any
regulatory body, exchange, or board. Nothing herein contained shall constitute
the Trading Advisor or any other trading advisor or advisors for the Partnership
as members of any partnership, joint venture, association, syndicate or other
entity, or be deemed to confer on any of them any express, implied, or apparent
authority to incur any obligation or liability on behalf of any other. It is
expressly agreed that the Trading Advisor is neither a promoter, sponsor, or
issuer with respect to the Partnership, nor does the Trading Advisor have any
authority or responsibility with respect to the sale or issuance of Units.
5. Commodity Broker.
The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, Xxxx Xxxxxx Xxxxxxxx Inc. ("DWR") shall act as non-clearing
commodity broker and Xxxx Futures, Inc. ("CFI") shall act as the clearing
commodity broker for the Partnership. The General Partner shall provide the
Trading Advisor with copies of brokerage statements. Notwithstanding that CFI
shall act as the clearing commodity broker for the Partnership, the Trading
Advisor may execute trades through floor brokers other than those employed by
CFI so long as arrangements are made for such floor brokers to "give-up" or
transfer the positions to CFI and provided that the rates charged by such floor
brokers have been approved in writing by DWR. The Trading Advisor will not be
responsible for paying give-up fees.
6. Fees.
(a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:
(i) A monthly management fee, without regard to the
profitability of the Trading Advisor's trading for the Partnership's account,
equal to 1/4 of 1% (a 3% annual rate) of the "Net Assets" of the Partnership
allocated to the Trading Advisor (as defined in Section 6(c)) as of the opening
of business on the first day of each calendar month.
(ii) A monthly incentive fee equal to 15% of the "Trading
Profits" (as defined in Section 6(d)) as of the end of each calendar month,
payable on a non-netted basis vis-a-vis other trading advisors(s) of the
Partnership.
(b) If this Agreement is terminated on a date other than the last
day of a month, the incentive fee described above shall be determined as if such
date were the end of a month. If this Agreement is terminated on a date other
than the end of a month, the management fee described above shall be determined
as if such date were the end of a month, but such fee shall be prorated based on
the ratio of the number of trading days in the month through the date of
termination to the total number of trading days in the month. If, during any
month after the Partnership commences trading operations (including the month in
which the Partnership commences such operations), the Partnership does not
conduct business operations, or suspends trading for the account of the
Partnership managed by the Trading Advisor, or, as a result of an act or
material failure to act by the Trading Advisor, is otherwise unable to utilize
the trading advice of the Trading Advisor on any of the trading days of that
period for any reason, the management fee described above shall be prorated
based on the ratio of the number of trading days in the month which the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilizes the trading advice of the Trading Advisor to the total number of
trading days in the month.
(c) As used herein, the term "Net Assets" shall mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents, accrued interest and amortization of original issue discount, and
the market value of all open futures interest positions and other assets of the
Partnership) less all liabilities of the Partnership (including, but not limited
to, all brokerage fees, incentive and management fees, and extraordinary
expenses) determined in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting. Unless generally
accepted accounting principles require otherwise, the market value of a futures
or option contract traded on a United States exchange shall mean the settlement
price on the exchange on which the particular futures or option contract shall
be traded by the Partnership on the day with respect to which the Net Assets are
being determined; provided, however, that if a contract could not be liquidated
on such day due to the operation of daily limits or other rules of the exchange
on which that contract shall be traded or otherwise, the settlement price on the
first subsequent day on which the contract could be liquidated shall be the
market value of such contract for such day. The market value of a forward
contract or a futures or option contract traded on a foreign exchange or market
shall mean its market value as determined by the General Partner on a basis
consistently applied for each different variety of contract.
(d) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets allocated to the Trading Advisor, decreased by the
Trading Advisor's monthly management fees and a pro rata portion of the monthly
brokerage fee relating to the Trading Advisor's allocated Net Assets; with such
trading profits and items of decrease determined from the end of the last month
in which an incentive fee was earned by the Trading Advisor or, if no incentive
fee has been earned previously by the Trading Advisor, from the date that the
Partnership commenced trading to the end of the month as of which such incentive
fee calculation is being made.
(e) If any payment of incentive fees is made to the Trading Advisor
on account of Trading Profits earned by the Partnership on Net Assets allocated
to the Trading Advisor and the Partnership thereafter fails to earn Trading
Profits or experiences losses for any subsequent incentive period with respect
to such amounts so allocated, the Trading Advisor shall be entitled to retain
such amounts of incentive fees previously paid to the Trading Advisor in respect
of such Trading Profits. However, no subsequent incentive fees shall be payable
to the Trading Advisor until the Partnership has again earned Trading Profits on
the Trading Advisor's allocated Net Assets; provided, however, that if the
Trading Advisor's allocated Net Assets are reduced or increased because of
redemptions, additions or reallocations that occur at the end of, or subsequent
to, an incentive period in which the Partnership experiences a futures interests
trading loss with respect to Net Assets allocated to the Trading Advisor, the
trading loss for that incentive period which must be recovered before the
Trading Advisor's allocated Net Assets will be deemed to experience Trading
Profits will be equal to the amount determined by (x) dividing the Trading
Advisor's allocated Net Assets after such increase or decrease by the Trading
Advisor's allocated Net Assets immediately before such increase or decrease and
(y) multiplying that fraction by the amount of the unrecovered futures interests
trading loss experienced in that month prior to such increase or decrease. In
the event that the Partnership experiences a futures interests trading loss in
more than one month with respect to the Trading Advisor's allocated Net Assets
without the payment of an intervening incentive fee and Net Assets are increased
or reduced in more than one such month because of redemptions, additions or
reallocations, then the trading loss for each such month shall be adjusted in
accordance with the formula described above and such increased or reduced amount
of futures interests trading loss shall be carried forward and used to offset
subsequent futures interest trading profits. The portion of redemptions to be
allocated to the Net Assets of the Partnership managed by each of the trading
advisors to the Partnership shall be in the sole discretion of the General
Partner.
(f) The Partnership will remit the management and incentive fees to
the Trading Advisor as soon as practicable, but in no event later than 30 days,
in the case of the management fee, or 45 days in the case of the incentive fee
of the month-end as of which they are due, together with an itemized statement
showing the calculations.
7. Term.
This Agreement shall continue in effect until May 1, 2000 (the
"Initial Termination Date"). At least thirty days prior to the Initial
Termination Date, the Trading Advisor may terminate this Agreement upon 30 days'
prior written notice to the Partnership. If this Agreement is not terminated on
the Initial Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least thirty days prior to the expiration
of any such one-year period, the Trading Advisor may terminate this Agreement at
the end of the current one-year period by providing written notice to the
Partnership indicating that the Trading Advisor desires to terminate this
Agreement at the end of such one-year period. This Agreement shall also
terminate if the Partnership terminates. The Partnership shall have the right to
terminate this Agreement at its discretion (a) at any month end upon 5 days'
prior written notice to the Trading Advisor or (b) at any time upon written
notice to the Trading Advisor upon the occurrence of any of the following
events: (i) if any person described as a "principal" of the Trading Advisor in
the Prospectus (other than Xxxxxx Xxxxx) ceases for any reason to be a principal
of the Trading Advisor; (ii) if the Trading Advisor becomes bankrupt or
insolvent; (iii) if the Trading Advisor is unable to use its trading programs,
systems or methods as in effect on the date hereof and as refined and modified
in the future for the benefit of the Partnership; (iv) if the registration, as a
commodity trading advisor, of the Trading Advisor with the CFTC or its
membership in the NFA is revoked, suspended, terminated, or not renewed, or
limited or qualified in any respect; (v) except as provided in Section 12
hereof, if the Trading Advisor merges or consolidates with, or sells or
otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interests trading programs, systems or
methods, or its goodwill to, any individual or entity; (vi) if the Trading
Advisor's initially allocated Net Assets, after adjusting for distributions,
additions, redemptions, or reallocations, if any, shall decline by 50% or more
as a result of trading losses or if Net Assets allocated to the Trading Advisor
fall below $1,000,000.00 at any time; (vii) if, at any time, the Trading Advisor
violates any trading or administrative policy described in writing to the
Trading Advisor by the General Partner, except with the prior express written
consent of the General Partner; or (viii) if the Trading Advisor fails in a
material manner to perform any of its obligations under this Agreement. The
Trading Advisor may terminate this Agreement at any time, upon written notice to
the Partnership, in the event: (i) that the General Partner imposes additional
trading limitation(s) in the form of one or more trading policies or
administrative policies which the Trading Advisor does not agree to follow in
its management of its allocable share of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's trading program(s) used by the Partnership and
Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to a determination by the General Partner that the Trading Advisor has
violated the Partnership's trading policies and the Trading Advisor certifies to
the General Partner in writing that as a result, the Trading Advisor believes
the performance results of the Trading Advisor relating to the Partnership will
be materially adversely affected; (iv) the Partnership materially breaches this
Agreement and does not correct the breach within 10 days of receipt of a written
notice of such breach from the Trading Advisor; or (v) the Trading Advisor has
amended its trading program to include a foreign futures or option contract
which may lawfully be traded by the Partnership under CFTC regulations and
counsel, mutually acceptable to the parties, has not opined that such inclusion
would cause adverse tax consequences to Limited Partners and the General Partner
does not consent to the Trading Advisor's trading such contract for the
Partnership within 5 business days of a written request by the Trading Advisor
to do so, and, if such consent is given, does not make arrangements to
facilitate such trading within 30 days of such notice; or (vi) the assets
allocated to the Trading Advisor fall below $1,000,000 at any time.
The indemnities set forth in Section 8 hereof shall survive any
termination of this Agreement.
8. Standard of Liability; Indemnifications.
(a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a material breach of this
Agreement or a representation, warranty or covenant herein, misconduct or
negligence or is the result of any such person not having acted in good faith
and in the reasonable belief that such actions or omissions were in, or not
opposed to, the best interests of the Partnership.
(b) Trading Advisor Indemnity in Respect of Management Activities.
The Trading Advisor shall indemnify, defend and hold harmless the Partnership
and the General Partner, their controlling persons, their affiliates and their
respective directors, officers, shareholders, employees, and controlling persons
from and against any and all losses, claims, damages, liabilities (joint and
several), costs, and expenses (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement; provided that the Trading Advisor shall have approved such
settlement) incurred as a result of any action or omission involving the
Partnership's futures interests trading of the Trading Advisor, or any of its
controlling persons or affiliates or their respective directors, officers,
partners, shareholders, or employees; provided that such liability arises from
an act or omission of the Trading Advisor, or any of its controlling persons or
affiliates or their respective directors, officers, partners, shareholders, or
employees which is found by a court of competent jurisdiction upon entry of a
final judgment (or, if no final judgment is entered, by an opinion rendered by
counsel who is approved by the Partnership and the Trading Advisor, such
approval not to be unreasonably withheld) to be a material breach of this
Agreement or a representation, warranty or covenant herein, the result of
misconduct or negligence, or conduct not done in good faith in the reasonable
belief that it was in, or not opposed to, the best interests of the Partnership.
The termination of any demand, claim, lawsuit, action, or proceeding by
settlement shall not, of itself, create a presumption that the conduct in
question was not undertaken in good faith and in a manner reasonably believed to
be in, or not opposed to, the best interests of the Partnership.
(c) Partnership Indemnity in Respect of Management Activities. The
Partnership shall indemnify, defend, and hold harmless the Trading Advisor, its
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons, from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Partnership shall have approved such settlement) resulting from a demand, claim,
lawsuit, action, or proceeding (other than those incurred as a result of claims
brought by or in the right of an indemnified party) relating to the business or
activities of the Partnership undertaken by the Trading Advisor pursuant to this
Agreement or a material breach of this Agreement or a representation, warranty
or covenant Advisorherein by the General Partner or the Partnership; provided
that a court of competent jurisdiction upon entry of a final judgment finds (or,
if no final judgment is entered, an opinion is rendered to the Partnership by
independent counsel reasonably acceptable to both parties) to the effect that
the action or inaction of such indemnified party that was the subject of the
demand, claim, lawsuit, action, or proceeding did not constitute negligence,
misconduct, or a material breach of this Agreement or a representation, warranty
or covenant of the Trading Advisor herein and was done in good faith and in a
manner such indemnified party reasonably believed to be in, or not opposed to,
the best interests of the Partnership. The termination of any demand, claim,
lawsuit, action, or proceeding by settlement shall not, of itself, create a
presumption that the conduct in question was not undertaken in good faith and in
a manner reasonably believed to be in, or not opposed to, the best interests of
the Partnership.
(d) Trading Advisor Indemnity in Respect of Sale of Units. The
Trading Advisor shall indemnify, defend and hold harmless DWR, CFI the
Partnership, the General Partner, any Additional Seller, and their affiliates
and each of their officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Securities and Exchange Act of 1934 Act, as amended (the
"Exchange Act") the Commodity Exchange Act, and rules promulgated thereunder the
("CEAct") the securities or Blue Sky law of any jurisdiction, or otherwise
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement, provided that the
Trading Advisor shall have approved such settlement, and in connection with any
administrative proceedings), in respect of the offer or sale of Units, insofar
as such loss, claim, damage, liability, cost, or expense (or action in respect
thereof) arises directly out of, or is based upon: (i) a material breach by the
Trading Advisor of any representation, warranty, or agreement in this Agreement
or any certificate delivered pursuant to this Agreement or the failure by the
Trading Advisor to materially perform any covenant made by the Trading Advisor
herein; (ii) a misleading or untrue statement or alleged misleading or untrue
statement of a material fact made in the Registration Statement, the Prospectus,
or any related selling material or an omission or alleged omission to state a
material fact therein which is required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus and any selling
material, in light of the circumstances under which they were made) not
misleading, and such statement or omission relates specifically to the Trading
Advisor, or its Trading Advisor Principals (as defined below) or was made in
reliance upon, and in conformity with, written information or instructions
furnished by the Trading Advisor (provided, however, that with respect to any
related selling material only such related selling material as shall have been
approved in writing by the Trading Advisor).
(e) Partnership Indemnity in Respect of Sale of Units. The
Partnership agrees to indemnify, defend and hold harmless the Trading Advisor
and each of its officers, directors, principals, shareholders, controlling
persons from and against any loss, claim, damage, liability, cost, and expense,
joint and several, to which any indemnified person may become subject under the
Securities Act, the Exchange Act, the CEAct, the securities or Blue Sky law of
any jurisdiction, or otherwise (including any reasonable investigatory, legal,
and other expenses incurred in connection with, and any amounts paid in, any
settlement, provided that the Partnership shall have approved such settlement,
and in connection with any administrative proceedings), in respect of the offer
or sale of Units, insofar as such loss, claim, damage, liability, cost, or
expense (or action in respect thereof) arises out of, or is based upon: (i) a
material breach by the Partnership or the General Partner of any representation,
warranty, or agreement in this Agreement or the failure by the Partnership or
the General Partner to perform any covenant made by them herein; or (ii) a
misleading or untrue statement or alleged misleading or untrue statement of a
material fact made in the Registration Statement, the Prospectus, or any related
selling material or an omission or alleged omission to state a material fact
therein which is required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus or the selling material, in
light of the circumstances under which they were made) not misleading, provided
that such materially misleading or untrue statement or alleged materially
misleading or untrue statement or omission or alleged omission does not relate
to the Trading Advisor or its Trading Advisor Principals or was not made in
reliance upon, and in conformity with, information or instructions furnished by
the Trading Advisor (provided, however, that with respect to any related selling
material, only such related selling material as shall have been approved in
writing by the Trading Advisor), or does not result from a material breach by
the Trading Advisor of any representation, warranty, or agreement in this
Agreement or any certificate delivered pursuant to this Agreement or the failure
by the Trading Advisor to materially perform any covenant made in this
Agreement.
(f) The foregoing agreements of indemnity shall be in addition to,
and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.
(g) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.
Notwithstanding the proceeding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.
In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified persons in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.
Notwithstanding any other provision herein to the contrary, neither
Xxxx X. Xxxxx nor Xxxx X. Xxxxxxx shall have any liability to the Partnership,
the General Partner or any other person, or their controlling persons,
directors, officers, shareholders or employees under this Agreement except for
fraud or willful misconduct by Xxxx X. Xxxxx or Xxxx X. Xxxxxxx, as applicable.
9. Right to Advise Others and Uniformity of Acts and Practices.
(a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor by any act or omission favor any account advised or
managed by the Trading Advisor over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor agrees to treat the Partnership in a fiduciary capacity to the
extent recognized by applicable law, but, subject to that standard, the Trading
Advisor or any of its principals or affiliates shall be free to advise and
manage accounts for other investors and shall be free to trade on the basis of
the same trading programs, systems, methods, or strategies employed by the
Trading Advisor for the account of the Partnership, or trading programs,
systems, methods, or strategies which are entirely independent of, or materially
different from, those employed for the account of the Partnership, and shall be
free to compete for the same futures interests as the Partnership or to take
positions opposite to the Partnership, where such actions do not knowingly or
deliberately prefer any of such accounts over the account of the Partnership.
(b) The Trading Advisor shall not be restricted as to the number or
nature of its clients, except that: (i) so long as the Trading Advisor acts as a
trading advisor for the Partnership, neither the Trading Advisor nor any of its
principals or affiliates shall hold knowingly any position or control any other
account which would cause the Partnership, the Trading Advisor, or the
principals or affiliates of the Trading Advisor to be in violation of the CEAct
or any regulations promulgated thereunder, any applicable rule or regulation of
the CFTC or any other regulatory body, exchange, or board; and (ii) neither the
Trading Advisor nor any of its principals or affiliates shall render futures
interests trading advice to any other individual or entity or otherwise engage
in activity which shall knowingly cause positions in futures interests to be
attributed to the Trading Advisor under the rules or regulations of the CFTC or
any other regulatory body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its trading programs, systems,
methods or strategies to accommodate the trading of additional funds or
accounts. If applicable speculative position limits are exceeded by the Trading
Advisor in the opinion of (i) independent counsel (who shall be other than
counsel to the Partnership), (ii) the CFTC, or (iii) any other regulatory body,
exchange, or board, the Trading Advisor and its principals and affiliates shall
promptly liquidate positions in all of their accounts, including the
Partnership's account, as to which positions are attributed to the Trading
Advisor as nearly as possible in proportion to the accounts' respective amounts
available for trading (taking into account different degrees of leverage and
"notional" equity) to the extent necessary to comply with the applicable
position limits.
10. Representations, Warranties, and Covenants of the Trading
Advisor.
(a) Representations of the Trading Advisor. The Trading Advisor with
respect to itself and each of its principals represents and warrants to and
agrees with the General Partner and the Partnership as follows:
(i) It will exercise good faith and due care in using the
trading programs on behalf of the Partnership that are described in the
Prospectus (as modified from time to time) or any other trading programs agreed
to by the General Partner.
(ii) The Trading Advisor shall follow, at all times, the
trading policies of the Partnership (as described in the Prospectus) and as
amended in writing and furnished to the Trading Advisor from time to time,
provided, that the General Partner has notified the Trading Advisor of these
trading policies.
(iii) The Trading Advisor shall trade: (A) the Partnership's Net
Assets pursuant to the same trading programs described in the Prospectus unless
the General Partner agrees otherwise and (B) only in futures and option
contracts traded on U.S. contract markets, foreign currency forward contracts
traded with CFI, and such other futures interests which are approved in writing
by the General Partner or have been approved by the CFTC for U.S. persons.
(iv) The Trading Advisor is duly organized, validly existing and
in good standing as a corporation under the laws of the state of its
incorporation and is qualified to do business as a foreign corporation and in
good standing in each other jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to so qualify would
materially adversely affect the Trading Advisor's ability to perform its duties
under this Agreement. The Trading Advisor has full corporate power and authority
to perform its obligations under this Agreement, and as described in the
Registration Statement and Prospectus. The only principals (as defined in Rule
4.10(e) under the CEAct) of the Trading Advisor are those set forth in the
Prospectus (the "Trading Advisor Principals").
(v) All references to the Trading Advisor and each Trading
Advisor Principal, including the Trading Advisor's trading programs, approaches,
systems and performance, in the Registration Statement and the Prospectus, and
in the supplemental selling material which has been approved in writing by the
Trading Advisor, are accurate and complete in all material respects. With
respect to the material relating to the Trading Advisor and each Trading Advisor
Principal, including the Trading Advisor's and the Trading Advisor Principals'
trading programs, approaches, systems , and performance information, as
applicable, (i) the Registration Statement and Prospectus contain all statements
and information required to be included therein under the CEAct,(ii) the
Registration Statement as of its effective date will not contain any misleading
or untrue statement of a material fact or omit to state a material fact which is
required to be stated therein or necessary to make the statements therein not
misleading and (iii) the Prospectus at its date of issue and as of each closing
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
(vi) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Trading Advisor and is a valid and
binding agreement of the Trading Advisor enforceable in accordance with its
terms.
(vii) Each of the Trading Advisor and each "principal" of the
Trading Advisor, as defined in Rule 3.1 under the CEAct, has all federal and
state governmental, regulatory and exchange licenses, registrations and
approvals and has effected all filings with federal and state governmental and
regulatory agencies required to conduct its or his business and to act as
described in the Registration Statement and Prospectus or required to perform
its or his obligations under this Agreement. The Trading Advisor is registered
as a commodity trading advisor under the CEAct and is a member of the NFA in
such capacity.
(viii) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein, the consummation of the
transactions contemplated herein and in the Prospectus and the payment of the
fees hereunder will not violate, or constitute a breach of, or default under,
the certificate of incorporation or bylaws of the Trading Advisor or any
agreement or instrument by which it is bound or of any order, rule, law or
regulation binding on it of any court or any governmental body or administrative
agency or panel or self-regulatory organization having jurisdiction over it.
(ix) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the Prospectus,
there has not been any material adverse change in the condition, financial or
otherwise, business or prospects of the Trading Advisor or any Trading Advisor
Principal.
(x) Except as set forth in the Registration Statement or
Prospectus there has not been in the five years preceding the date of the
Prospectus and there is not pending, or to the best of the Trading Advisor's
knowledge threatened, any action, suit or proceeding before or by any court or
other governmental body to which the Trading Advisor or any Trading Advisor
Principal is or was a party, or to which any of the assets of the Trading
Advisor is or was subject and which resulted in or might reasonably be expected
to result in any material adverse change in the condition, financial or
otherwise, business or prospects of the Trading Advisor or which is required
under the Securities Act or CEAct to be disclosed in the Prospectus. None of the
Trading Advisor or any Trading Advisor Principal has received any notice of an
investigation by the NFA or the CFTC regarding noncompliance by the Trading
Advisor or any of the Trading Advisor Principals with the CEAct.
(xi) Neither the Trading Advisor nor any Trading Advisor
Principal has received, or is entitled to receive, directly or indirectly, any
commission, finder's fee, similar fee, or rebate from any person in connection
with the organization or operation of the Partnership, other than as described
in the Prospectus.
(b) Covenants of the Trading Advisor. The Trading Advisor covenants
and agrees that:
(i) The Trading Advisor shall use its best efforts to maintain
all registrations and memberships necessary for the Trading Advisor to continue
to act as described herein and to at all times comply in all material respects
with all applicable laws, rules, and regulations, to the extent that the failure
to so comply would have a materially adverse effect on the Trading Advisor's
ability to act as described herein.
(ii) The Trading Advisor shall inform the General Partner
immediately as soon as the Trading Advisor or any of its principals becomes the
subject of any investigation, claim or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any litigation
materially affecting the business of the Trading Advisor. The Trading Advisor
shall also inform the General Partner immediately if the Trading Advisor or any
of its officers becomes aware of any breach of this Agreement by the Trading
Advisor.
(iii) The Trading Advisor agrees reasonably to cooperate by
providing information regarding itself and its performance in the preparation of
any amendments or supplements to the Registration Statement and the Prospectus.
11. Representations, Warranties and Covenants of the General
Partner and the Partnership.
(a) Representations of the General Partner and the Partnership. The
General Partner and the Partnership represent and warrant to the Trading
Advisor, as follows:
(i) The Partnership has provided to the Trading Advisor, and
filed with SEC, the Registration Statement and has filed copies thereof with:
(i) the CFTC under the CEAct; (ii) the NASD pursuant to its Rules of Fair
Practice; and (iii) the NFA in accordance with NFA Compliance Rule 2-13. The
Partnership will not file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus unless the Trading Advisor has
received reasonable prior notice of and a copy of such amendments or supplements
and has not reasonably objected thereto in writing.
(ii) The Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be taken by the
General Partner and the Partnership as a condition to the sale of the Units to
qualified subscribers therefor has been, or prior to each Closing as defined in
the Prospectus will have been taken; and, upon payment of the consideration
therefor specified in each accepted Subscription and Exchange Agreement and
Power of Attorney, in such form as attached to the Prospectus, the Units will
constitute valid limited partnership interests in the Partnership.
(iii) The Partnership is a limited partnership duly organized
pursuant to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the Delaware Revised Uniform Limited Partnership Act ("DRULPA")
and is validly existing under the laws of the State of Delaware with full power
and authority to engage in the trading of futures interests and to engage in its
other contemplated activities as described in the Prospectus; the Partnership
has received a certificate of authority to do business in the State of New York
as provided by Article 8-A of the New York Revised Limited Partnership Act and
is qualified to do business in each jurisdiction in which the nature or conduct
of its business requires such qualification and where failure to be so qualified
could materially adversely affect the Partnership's ability to perform its
obligations hereunder.
(iv) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Delaware and in good standing and qualified to do business as a foreign
corporation under the laws of the State of New York and is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature or conduct of its business requires such qualification and
where the failure to be so qualified could materially adversely affect the
General Partner's ability to perform its obligations hereunder.
(v) The Partnership and the General Partner have full
partnership or corporate power and authority under applicable law to conduct
their business and to perform their respective obligations under this Agreement.
(vi) The Registration Statement and Prospectus contain all
statements and information required to be included therein by the CEAct. When
the Registration Statement becomes effective under the Securities Act and at all
times subsequent thereto up to and including each Closing, the Registration
Statement and Prospectus will comply in all material respects with the
requirements of the Securities Act, the rules and regulations promulgated
thereunder (the "SEC Regulations"), the rules of the NFA and the CEAct. The
Registration Statement as of its effective date will not contain any misleading
or untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus as of its date of issue and at each Closing will not contain any
misleading or untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading. The supplemental selling
material, when read in conjunction with the Prospectus, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not misleading. The supplemental selling material will
comply with the CEAct and the regulations and rules of the NFA and NASD. The
representation, and warranties in this clause (vi) shall not, however, apply to
any statement or omission in the Registration Statement, Prospectus or
supplemental selling material relating to the Trading Advisor, or its Trading
Advisor Principals or its trading programs or made in reliance upon and in
conformity with information furnished by the Trading Advisor.
(vii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, business or
prospects of the General Partner or the Partnership, whether or not arising in
the ordinary course of business.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the General Partner on behalf of the Partnership and
constitutes a valid, binding and enforceable agreement of the Partnership in
accordance with its terms.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the consummation of the
transactions contemplated herein and in the Registration Statement and
Prospectus will not violate, or constitute a breach of, or default under, the
General Partner's certificate of incorporation, bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement or any agreement or
instrument by which either the General Partner or the Partnership, as the case
may be, is bound or any order, rule, law or regulation applicable to the General
Partner or the Partnership of any court or any governmental body or
administrative agency or panel or self-regulatory organization having
jurisdiction over the General Partner or the Partnership.
(x) Except as set forth in the Registration Statement or
Prospectus, there has not been in the five years preceding the date of the
Prospectus and there is not pending or, to the best of the General Partner's
knowledge, threatened, any action, suit or proceeding at law or in equity before
or by any court or by any federal, state, municipal or other governmental body
or any administrative, self-regulatory or commodity exchange organization to
which the General Partner or the Partnership is or was a party, or to which any
of the assets of the General Partner or the Partnership is or was subject and
which resulted in or might reasonably be expected to result in any materially
adverse change in the condition, financial or otherwise, of the General Partner
or the Partnership or which is required under the Securities Act or the CEAct to
be disclosed in the Prospectus; and neither the General Partner nor any of the
principals of the General Partner, as "principals" is defined under Rule 4.10
under the CEAct ("General Partner Principals") has received any notice of an
investigation by the NFA, NASD, SEC or CFTC regarding non-compliance by the
General Partner or the General Partner Principals or the Partnership with the
CEAct or the Securities Act which is required under the Securities Act or the
CEAct to be disclosed in the Prospectus.
(xi) The General Partner and each principal of the General
Partner, as defined in Rule 3.1 under the CEAct, have all federal and state
governmental, regulatory and exchange approvals, registrations, and licenses,
and have effected all filings with federal and state governmental agencies and
regulatory agencies required to conduct their business and to act as described
in the Registration Statement and Prospectus or required to perform their
obligations under this Agreement (including, without limitation, registration as
a commodity pool operator under the CEAct and membership in the NFA as a
commodity pool operator) and will maintain all such required approvals,
licenses, filings and registrations for the term of this Agreement. The General
Partner's principals identified in the Registration Statement are all of the
General Partner Principals.
(b) Covenants of the General Partner. The General Partner covenants
and agrees that:
(i) The General Partner shall use its best efforts to maintain
all registrations and memberships necessary for the General Partner to continue
to act as described herein and in the Prospectus and to all times comply in all
material respects with all applicable laws, rules, and regulations, to the
extent that the failure to so comply would have a materially adverse effect on
the General Partner's ability to act as described herein and in the Prospectus.
(ii) The General Partner shall inform the Trading Advisor
immediately as soon as the General Partner or any of its principals becomes the
subject of any investigation, claim, or proceeding of any regulatory authority
having jurisdiction over such person or becomes a named party to any litigation
materially affecting the business of the General Partner. The General Partner
shall also inform the Trading Advisor immediately if the General Partner or any
of its officers become aware of any breach of this Agreement by the General
Partner.
(iii) The Partnership will furnish to the Trading Advisor copies
of the Registration Statement, the Prospectus, and all amendments and
supplements thereto, in each case as soon as available.
12. Merger or Transfer of Assets of Trading Advisor.
The Trading Advisor may merge or consolidate with, or sell or
otherwise transfer its advisory business, or all or a substantial portion of its
assets, any portion of its commodity trading programs, systems or methods, or
its goodwill, to any entity that is directly or indirectly controlled by,
controlling, or under common control with, the Trading Advisor, provided that
such entity expressly assumes all obligations of the Trading Advisor under this
Agreement and agrees to continue to operate the business of the Trading Advisor,
substantially as such business is being conducted on the date hereof.
13. Complete Agreement.
This Agreement constitutes the entire agreement between the parties
with respect to the matters referred to herein, and no other agreement, verbal
or otherwise, shall be binding as between the parties unless in writing and
signed by the party against whom enforcement is sought.
14. Assignment.
This Agreement may not be assigned by any party hereto without the
express written consent of the other parties hereto.
15. Amendment.
This Agreement may not be amended except by the written consent of
the parties hereto.
16. Severability.
The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.
17. Closing Certificates and Opinions.
(1) The Trading Advisor shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement and at the
request of the General Partner at any Monthly Closing (as defined in the
Prospectus), provide the following:
(a) To DWR, the General Partner and the Partnership a
certificate, dated the date of any such closing and in form and substance
satisfactory to such parties, to the effect that:
(i) The representations and warranties by the Trading
Advisor in this Agreement are true, accurate, and a complete on and as of the
date of the closing, as if made on the date of the closing.
(ii) The Trading Advisor has performed all of its
obligations and satisfied all of the conditions on its part to be performed or
satisfied under this Agreement, at or prior to the date of such closing.
(b) To DWR, the General Partner and the Partnership an opinion
of counsel to the Trading Advisor, in form and substance satisfactory to such
parties, to the effect that:
(i) The Trading Advisor is a corporation duly organized
and validly existing under the laws of the state of its incorporation and is
qualified to do business and in good standing in each other jurisdiction in
which the nature or conduct of its business requires such qualification and the
failure to be duly qualified would materially adversely affect the Trading
Advisor's ability to perform its obligations under this Agreement. The Trading
Advisor has full corporate power and authority to conduct its business as
described in the Registration Statement and Prospectus and to perform its
obligations under this Agreement.
(ii) The Trading Advisor (including the Trading Advisor
Principals) has all governmental, regulatory, self-regulatory and commodity
exchange and clearing association licenses, registrations, and memberships
required by law, and the Trading Advisor (including the Trading Advisor
Principals) has made all filings necessary to perform its obligations under this
Agreement and to conduct its business as described in the Registration Statement
and Prospectus, except for such licenses, memberships, filings and
registrations, the absence of which would not have a material adverse effect on
its ability to act as described in the Registration Statement and Prospectus or
to perform its obligations under this Agreement, and, to the best of such
counsel's knowledge, after due investigations, none of such licenses,
memberships or registrations have been rescinded, revoked or suspended.
(iii) This Agreement has been duly authorized, executed
and delivered by or on behalf of the Trading Advisor and constitutes a valid and
binding agreement of the Trading Advisor enforceable in accordance with its
terms, subject only to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability generally of
rights of creditors and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law), and
except as enforceability of the indemnification, exculpation, and contribution
provisions contained in this Agreement may be limited by applicable law or
public policy and the enforcement of specific terms or remedies may be
unavailable.
(iv) Based upon due inquiry of certain officers of the
Trading Advisor, to the best of such counsel's knowledge, except as disclosed in
the Prospectus, there are no material actions, suits or proceedings at law or in
equity either threatened or pending in any court or before or by any
governmental or administrative body nor have there been any such actions, suits
or proceedings at any time within the five years preceding the date of the
Prospectus against the Trading Advisor or any Trading Advisor Principal which
are required to be disclosed in the Registration Statement or Prospectus.
(v) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not be in
contravention of any of the provisions of the certificate of incorporation or
bylaws of the Trading Advisor and, based upon due inquiry of certain officers of
the Trading Advisor, to the best of such counsel's knowledge, will not
constitute a breach of, or default under, or a violation of any instrument or
agreement known to such counsel by which the Trading Advisor is bound and will
not violate any order, law, rule or regulation applicable to the Trading Advisor
of any court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the Trading Advisor.
(vi) Based upon reliance of certain SEC "no-action"
letters, as of the closing, the performance by the Trading Advisor of the
transactions contemplated by this Agreement and as described in the Prospectus
will not require the Trading Advisor to be registered as an "investment adviser"
under the Investment Advisers Act of 1940, as amended.
(vii) Nothing has come to such counsel's attention that
would lead them to believe that, (A) the Registration Statement at the time it
became effective, insofar as the Trading Advisor and the Trading Advisor
Principals are concerned, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (B) the Prospectus at the time it
was issued or at the closing contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein relating to the Trading Advisor or the Trading Advisor Principals, in
light of the circumstances under which they were made, not misleading; provided
that such counsel need express no opinion or belief as to any Trading Advisor
performance data or notes or descriptions thereto set forth in the Registration
Statement and Prospectus.
In giving the foregoing opinion, counsel may rely on information
obtained from public officials, officers of the Trading Advisor, and other
resources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine.
(2) The General Partner shall, at the Partnership's first Monthly
Closing following the effective date of the Registration Statement, provide the
following:
(a) To the Trading Advisor, a certificate, dated the date of
such closing and in form and substance satisfactory to the Trading Advisor, to
the effect that:
(i) The representations and warranties by the
Partnership and the General Partner in this Agreement are true, accurate, and
complete on and as of the date of the closing as if made on the date of the
closing.
(ii)No stop order suspending the effectiveness of the
Registration Statement has been issued by the SEC and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the General
Partner, are contemplated or threatened under the Securities Act. No order
preventing or suspending the use of the Prospectus has been issued by the SEC,
NASD, CFTC, or NFA and no proceedings for that purpose have been instituted or
are pending or, to the knowledge of the General Partner, are contemplated or
threatened under the Securities Act or the CEAct.
(iii) The Partnership and the General Partner have
performed all of their obligations and satisfied all of the conditions on their
part to be performed or satisfied under this Agreement at or prior to the date
of the closing.
(b) Cadwalader, Xxxxxxxxxx & Xxxx, counsel to the General
Partner and the Partnership, shall deliver its opinion to the parties hereto, in
form and substance satisfactory to the parties hereto, to the effect that:
(i) The Partnership is a limited partnership duly formed
pursuant to the Certificate of Limited Partnership, the Limited Partnership
Agreement and the DRULPA and is validly existing under the laws of the State of
Delaware with full partnership power and authority to conduct the business in
which it proposes to engage as described in the Registration Statement and
Prospectus and to perform its obligations under this Agreement; the Partnership
has received a Certificate of Authority as contemplated under the New York
Revised Limited Partnership Act and is qualified to do business in New York and
need not affect any other filings or qualifications under the laws of any other
jurisdictions to conduct its business as described in the Registration Statement
and Prospectus.
(ii) The General Partner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Delaware and is qualified to do business and is in good standing as a foreign
corporation in the State of New York and in each other jurisdiction in which the
nature or conduct of its business requires such qualification and the failure to
so qualify might reasonably be expected to result in material adverse
consequences to the Partnership or the General Partner's ability to perform its
obligations under this Agreement or as described in the Registration Statement
and Prospectus. The General Partner has full corporate power and authority to
conduct its business as described in the Registration Statement and Prospectus
and to perform its obligations under this Agreement.
(iii) The General Partner and each of its principals as
defined in Rule 3.1 under the CEAct, and the Partnership have all federal and
state governmental and regulatory licenses, registrations and memberships
required by law and have made all filings necessary in order for the General
Partner and the Partnership to perform their obligations under this Agreement to
conduct their business as described in the Registration Statement and
Prospectus, except for such licenses, memberships, filings, and registrations,
the absence of which would not have a material adverse effect on their ability
to act as described in the Registration Statement and Prospectus, or to perform
their obligations under this Agreement, and, to the best of such counsel's
knowledge, after due investigation, none of such licenses and memberships or
registrations have been rescinded, revoked or suspended.
(iv) This Agreement has been duly authorized, executed
and delivered by or on behalf of the General Partner and the Partnership, and
constitutes a valid and binding agreement of the General Partner and the
Partnership, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by general
principals of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except as enforceability of
indemnification, exculpation and contribution provisions contained in such
agreements may be limited by applicable law or public policy.
(v) The execution and delivery of this Agreement and the
offer and sale of the Units by the Partnership and the incurrence of the
obligations herein set forth and the consummation of the transactions
contemplated herein and in the Prospectus will not be in contravention of the
General Partner's certificate of incorporation or bylaws, the Certificate of
Limited Partnership, or the Limited Partnership Agreement and, to the best of
such counsel's knowledge based upon due inquiry of certain officers of the
General Partner, will not constitute a breach of, or default under, or a
violation of any agreement or instrument known to such counsel by which the
General Partner or the Partnership is bound and will not violate any order known
to such counsel or any law, rule or regulation applicable to the General Partner
or the Partnership of any court, governmental body, administrative agency, panel
or self-regulatory organization having jurisdiction over the General Partner or
the Partnership.
(vi) To such counsel's knowledge, based upon due inquiry
of certain officers of the General Partner, except as disclosed in the
Prospectus, there are no actions, suits or proceedings at law or in equity
pending or threatened before or by any court, governmental body, administrative
agency, panel or self-regulatory organization, nor have there been any such
suits or proceedings within the five years preceding the date of the Prospectus,
to which the General Partner or the Partnership is or was a party, or to which
any of their assets is or was subject, which would be material to an investor's
decision to invest in the Partnership or which might reasonably be expected to
result in a materially adverse change in the condition, financial or otherwise,
business or prospects of the General Partner, or the Partnership, whether or not
arising in the ordinary course of business.
(vii) The Registration Statement is effective under the
Securities Act and, to the best of such counsel's knowledge, no proceedings for
a stop order are pending or threatened under Section 8(d) of the Securities Act
or any similar state securities laws.
(viii) At the time the Registration Statement became
effective, the Registration Statement, and at the time the Prospectus was issued
and as of the closing, the Prospectus, complied as to form in all material
respects with the requirements of the Securities Act, the Securities
Regulations, the CEAct and the regulations of the NFA and NASD. Nothing has come
to such counsel's attention that would lead them to believe that the
Registration Statement at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus at the time it was issued or at the closing contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they where made, not misleading; provided, however, that Cadwalader,
Xxxxxxxxxx & Xxxx need express no opinion or belief (a) as to information in the
Registration Statement or the Prospectus regarding any Trading Advisor or its
principals, or (b) as to the financial statements, notes thereto and other
financial or statistical data set forth in the Registration Statement and
Prospectus, or (c) as to the performance data and notes or descriptions thereto
set forth in the Registration Statement and Prospectus.
(ix) Based upon reliance on certain SEC "no-action"
letters, as of the closing, the Partnership need not register as an "investment
company" under the Investment Company Act of 1940, as amended.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner and other
sources believed by it to be responsible and may assume that signatures on all
documents examined by it are genuine, and that a Subscription and Exchange
Agreement and Power of Attorney in the form attached to the Prospectus has been
duly authorized, completed, dated, executed, and delivered and funds
representing the full subscription price for the Units purchased have been
delivered by each purchaser of Units in accordance with the requirements set
forth in the Prospectus.
18. Inconsistent Filings.
The Trading Advisor agrees not to file, participate in the filing
of, or publish any description of the Trading Advisor, or of its respective
principals or trading approaches that is materially inconsistent with those in
the Registration Statement and Prospectus, without so informing the General
Partner and furnishing to it copies of all such filings within a reasonable
period prior to the date of filing or publication.
19. Disclosure Documents.
During the term of this Agreement, the Trading Advisor shall furnish
to the General Partner promptly copies of all disclosure documents filed in
final form with the CFTC or NFA by the Trading Advisor. The General Partner
acknowledges receipt of the Trading Advisor's disclosure document dated February
28, 1998.
20. Notices.
All notices required to be delivered under this Agreement shall be
in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day actually received, addressed as follows (or
to such other address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
if to the Partnership:
Xxxx Xxxxxx Spectrum Select L.P.
c/o Demeter Management Corporation
0 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
if to the General Partner:
Demeter Management Corporation
0 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx
if to the Trading Advisor:
Sunrise Capital Management, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
21. Survival.
The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.
22. Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York. If any action or proceeding shall be
brought by a party to this Agreement or to enforce any right or remedy under
this Agreement, each party hereto hereby consents and will submit to the
jurisdiction of the courts of the State of New York or any federal court sitting
in the County, City and State of New York. Any action or proceeding brought by
any party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any federal court
sitting in the County, City and State of New York.
23. Remedies.
In any action or proceeding arising out of any of the provisions of
this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable
or ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.
24. Headings.
Headings to sections herein are for the convenience of the parties
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.
XXXX XXXXXX SPECTRUM SELECT L.P.
by Demeter Management Corporation,
General Partner
By: /s/ Xxxx X. Xxxxxx
------------------------------
Xxxx X. Xxxxxx
DEMETER MANAGEMENT CORPORATION
By: /s/ Xxxx X. Xxxxxx
------------------------------
Xxxx X. Xxxxxx
SUNRISE CAPITAL MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxx
President
